Feb201006

It was announced on Friday that the United States and Canada have come to an agreement regarding the US’ ‘Buy American’ policy that was put in place as part of the plan to lift America out of the recession. When it was initially put in place, Canada was upset because they felt that they should not be looked at like every other country because of their special and very deep rooted ties to the US economy. The Obama administration agreed to enter in to negotiations with Canada to see what can be done with regards to this.

For those that do not know, the Buy American provisions allow state and local governments to shun bidders from outside the country and only allow US firms to compete for the contracts. This agreement will open that competition up to Canadian firms as well. In return, Canada will do the same for its provincial and municipal contracts. A side note to this is that of the $275 billion allocated to infrastructure from the US stimulus bill, only $75 billion remain open for bidding (the other $200 billion has already been dished out to American companies before negotiations concluded). Many people on both sides of the border, including the media are not talking about this deal as completely positive because a lot people have very protectionist view points.

All those that are arguing against this deal are wrong. This is actually very good news for Canadians, Americans and even other countries in the world. The US market is massive and this allows Canadian companies to compete in it. The same can be said for Americans as well because some parts of Canada are also very lucrative markets. Moreover, the municipal governments in Ontario and Quebec (primarily Toronto and Montreal) have been getting ripped off on infrastructure and construction projects such as road repairs for some time now (Montreal even more than Toronto) because the mafia has strong government connections (it’s true, it was even featured on popular news shows). Perhaps this increased competition and outside complaining will help end this costly and unethical practice.

What this deal actually does, looking forward, is it actually makes Canada and the US even closer economically which is another small step to a future economic union between the two countries like the one in Europe. Speaking of Europe, When Canada agreed to this deal, it was done through the WTO which means that it opens the same doors to other foreign countries as well. This will help move along the slow talks that are taking place between Canada and the European Union on a free trade agreement.

I am a very strong believer in free trade. It is positive for many reasons (I won’t get in to them now as that is a separate discussion all together) and to honest, the people who are against it usually do not really understand it or they don’t have a strong understanding of how this world works and where it is moving. I will discuss the merits of removing trade barriers in a future post, but it is necessary now to mention that when you hear about the media talking about the negative aspects of this deal and free trade agreements in general, just know that the positives heavily out weigh the negatives and this deal is no different.